What, if any, is the correlation between cosigning on a loan and bankruptcy? If you are a debtor and you are faced with the option of filing for bankruptcy, consider that this could have an impact on your cosigners credit as well. If you cannot make a payment, then creditors can attempt to collect from the cosigner on the loan. What happens though if a debtor decides to file for total or partial bankruptcy? If you are in debt and you do decide to go through with filing for bankruptcy, it is important to inform any and all of your cosigners.
One thing that is important to remember is that filing for bankruptcy protects that particular debtor from their creditors. In turn, the cosigner would not be protected by bankruptcy since they are not the ones filing. Creditors could potentially attempt to collect a debt from them even if the other individual on the loan has filed. Cosigners may be better protected in the event of Chapter 13 bankruptcy (debt restructuring) as opposed to Chapter 7 bankruptcy (liquidation).
Knowing this, debtors may attempt to file for Chapter 13 rather than Chapter 7 in order to protect their cosigners. While this may be an option, some individuals may be virtually forced into a total bankruptcy due to their current financial situation. To learn more extensively about the type of bankruptcy you may be able to file, please do not hesitate to speak with a San Antonio bankruptcy attorney from our firm.
If you are a cosigner, or someone attempting to get a loan and you need a cosigner, make sure you ask yourself the following questions:
- Can you afford to pay the loan yourself?
- Do you understand that you could be sued if you fail to pay?
- Are you willing to take the necessary measures to avoid default?
A cosigner is essentially being asked to guarantee a debt. If you know that you cannot or are not willing to make the payments that you agreed to, then you should not enter into this type of debt. In addition to the loan debt, cosigners could also be asked to pay things like late fees and other collection costs. Again, for counseling on debts, cosigning and bankruptcy, do not hesitate to contact our firm.